Equities Stall While Greenback Remains Firm

Overview: The S&P 500 snapped a four-day advance yesterday, and equities in the Asia Pacific followed suit. All the markets in the region were lower but in Australia. MSCI's regional benchmark stalled after reached a four-month high in the middle of the week. European markets were mostly higher in the morning session after slipping yesterday. Including today's gains, the Dow Jones Stoxx 600 has risen in 11 of the past 14 sessions and has only fallen one week so far this year for almost an 8% gain. It is about 2% below its 200-day moving average. Benchmark 10-year bond yields eased moved lower in the Asia Pacific region after rates fell in the US yesterday. European bond markets are mixed, with core yields mostly a little lower and peripheral yields firmer, led by Italy. The US 10-year yield fell five basis points yesterday after the dismal retail sales report. The US dollar is firmer against most of the major currencies, and on the week, only Australian and New Zealand dollars resisted the draw. Among emerging market currencies, the Thai baht and Brazilian real were the only ones to buck the broader greenback advance.

Asia Pacific

China reported softer than expected inflation but record aggregate financing. January PPI rose 0.1% year-over-year down from 0.9%. It is the lowest in a couple of years and led by a decline in raw material prices. Consumer prices unexpectedly eased to 1.7% from 1.9%. Soft price pressures play into the economic slowdown story. However, a slowing of food price inflation (from 2.5% to 2.0%) was the main weight on the CPI as non-food prices were steady at 1.7%. Nevertheless, many expect the PBOC to ease monetary policy through another reduction in the reserves requirements, though a rate cut cannot be entirely ruled out either. Separately, China reported a surge in lending. Aggregate financing jumped to CNY4.64 trillion, a record, from CNY1.59 in December. New bank loans (CNY3.23 trillion from CNY1.08 trillion in December) drove this, but the difference between new bank loans and aggregate financing is a rough and ready metric of the shadow banking sector. Officials had been squeezing it, but now seem to have backed off in an attempt to support the economy. Activity in the shadow banking sector increased for the first time in eleven months.

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Marc Chandler has been covering the global capital markets in one fashion or another for more than 25 years, working at economic consulting firms and global investment banks.

Chandler attended North Central College for undergraduate work, where he majored in political science and the humanities. He holds master's degrees from Northern Illinois University and the University of Pittsburgh in American History and International Political Economy. Currently, Chandler teaches at New York University Center for Global Affairs, where he is an associate professor.

A prolific writer and speaker he appears regularly in the press and has spoken for, and is an honorary fellow of, the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009, Chandler was named a Business Visionary by Forbes. In 2009, his book, Making Sense of the Dollar, was published by Bloomberg Press and received a Bronze Award from Independent Publishers. His second book, Political Economy of Tomorrow was published in 2017.

Though a Chicago native, and life-long Cubs fan, Chandler currently resides in New York City with his wife, Jeannine, and son, Nathan.

Unless otherwise stated, all the work listed on Marc Chandler's profile is his and credit should be given as such. Mr. Chandler assumes no responsibility for losses, monetary or otherwise, resulting from the publication of his work. For more information please contact Marc.